Gov. Snyder declares financial emergency in Detroit

DETROIT — Michigan Gov. Rick Snyder declared Friday that the state’s largest city has a financial emergency, putting Detroit on the precipice of receiving an emergency financial manager.

Snyder said it’s one of the hardest decisions he’s had to make as governor.

“There’s probably no city that’s more financially challenged in the entire United States,” Snyder said, standing in front of an image of the city’s skyline and the words “Detroit Can’t Wait.”

“We went from the top to the bottom over the last 50 or 60 years, and it was a long process,” Snyder said, speaking about a city whose population has dropped from a peak of nearly 2 million people to about 700,00, for whom it struggles to provide basic services.

“I believe it’s appropriate to declare the City of Detroit in financial emergency based on the review team report,” the governor said.

The report issued Feb. 19 by the six-member Detroit Financial Review Team said the city has a $327 million general fund deficit and more than $14 billion in long-term liabilities that’s it not capable of resolving.

“We need a Detroit for the people living in Detroit,” Snyder said.

Mayor Dave Bing and the Detroit City Council now have 10 days to appeal Snyder’s decision, and if they do, a hearing would take place March 12.

If city officials aren’t able to convince Snyder to reconsider his decision, the state’s Emergency Loan Board would then appoint an emergency financial manager to the city. The governor said he has a “top candidate” for the job in mind.

“I would expect it’s going to be a year-and-a-half or longer,” Snyder said of the amount of time that Detroit’s finances could be under state control.

The governor’s decision comes after the state entered into a consent agreement with the city in April 2012.

“The agreement was signed in April — a whole bunch of those things, (they) didn’t get started working on until September,” Snyder said.

When asked if he thought state control of Detroit’s finances could result in civil unrest, Snyder said he hopes it doesn’t.

“I hope it never comes to that. I’m always sensitive to situations about emergency manager law. Obviously, it’s had a fair amount of controversy associated with it, but in the end, the real issue here is: Don’t Detroit’s problems have to be solved?” Snyder said.

“I believe a lot of citizens in Detroit are just tired of getting poor service (and) of not getting results. Of having this discussion go on, and too much fighting and bickering between a lot of people, and, ultimately, they just want to see this city be a better place to live and start moving forward in a positive way.”

Five cities and three school districts in Michigan currently have state-appointed emergency financial managers, including Detroit Public Schools.

Michigan House Minority Leader Tim Greimel, a Democrat from Auburn Hills, said an emergency financial manager isn’t the solution to Detroit’s problems.

“Pontiac and other cities that have had emergency managers have not had a positive experience. Surely, local elected officials in many of these communities have been guilty of mismanagement, but the question is whether emergency managers do a better job, and the evidence suggests they don’t,” Greimel said.

“And, that shouldn’t be surprising in light of the fact that emergency managers are unelected and unaccountable, and therefore do not have an incentive to act in the best interest of the local community,” he said.

Responding to a question at the Friday town hall meeting at the Maccabees Building, Snyder said a financial emergency doesn’t mean the loss of democracy in the city.

“No, and it doesn’t have to be. And, if you look at what we’ve done in other cities, in Flint, in Pontiac, the mayors are active in the cities still, the city councils are still meeting and talking about issues. That’s the process I would hope that would happen here,” he said.

The state’s new emergency manager law, Public Act 436, takes effect March 28 and gives local officials the ability to remove an emergency manager with a two-thirds vote of their governing body and the mayor’s approval 18 months after the manager’s appointment.

“All of the issues in Detroit aren’t going to be solved in 18 months. But I think 18 months is a reasonable time frame to say there can be a plan to deal with a long term liability, and a lot of that work done,” Snyder said.

Former Detroit City Councilwoman Sheila Cockrel asked the governor what would happen if the city were to vote out a state-appointed manager after 18 months.

“That’s something (where) there are other choices that they can make — a consent agreement is on the table, again, some (settlement) options, there are different choices — because, again, there are still things that need to be done,” Snyder responded.

When Public Act 436 takes effect, distressed communities and school districts will be presented with four options: A consent agreement with the state, the appointment of an emergency manager, mediation or a Chapter 9 bankruptcy filing.

The law restores many of the powers that emergency managers had with Public Act 4, including the ability to break labor contracts and override elected officials. Public Act 4 was repealed by voters in the November election.

The state’s existing emergency financial managers will become emergency managers when the law takes effect. Since Aug. 8, they’ve worked under Public Act 72 of 1990. On that day, Public Act 4 was suspended when Proposal 1 was placed on the ballot a the direction of the Michigan Supreme Court.